Canada gas pipeline build to start in 2019, pending LNG plant FID

VANCOUVER (Reuters) – Construction on TransCanada Corp’s (TRP.TO) C$4.8 billion ($3.8 billion) Coastal GasLink pipeline will start in early 2019, pending a positive final investment decision on the linked LNG Canada project, the head of the pipeline project said on Wednesday.

The comments followed a commitment from the chief executive of LNG Canada on Tuesday that the C$40 billion liquefied natural gas export terminal would be under construction in 2018. A final investment decision, or FID, from the project partners is expected this year.

“We would be looking at constructing in the early part of 2019,” Coastal Gaslink President Richard Gateman told reporters at an LNG conference. “We could be doing a little bit of field work in the fall (of 2018), if there’s an FID decision.”

If the project goes ahead, it will be a game changer for Canada’s natural gas producers, which currently face steep discounts for their product because of sagging demand in the United States and a lack of other export markets.

TransCanada expects to award contracts for the construction to four consortiums within the next two months, Gateman said. Those contractors will be a mix of local and international players with experience building in mountainous terrain, he said.

The company also expects to provide a cost update around the same time, he said, adding: “I’ll say that that was an estimate in 2011 dollars and if you take that to 2018 dollars, it’s a little bit more, but it’s not substantially more.”

The C$4.8 billion price tag in 2011 dollars would equate to C$5.3 billion now, according to the Bank of Canada inflation calculator.

Bateman also said TransCanada had worked hard to keep costs down on the project, just as the LNG Canada partners have worked to bring down costs on the terminal project.

“We contributed our part in terms of the pipeline budget and they did their part on the facility, which is why it looks like it is successfully coming together,” he said.

LNG Canada is a joint venture between Royal Dutch Shell Plc, PetroChina Co Ltd, Mitsubishi Corp and Korea Gas Corp. TransCanada will own and operate the pipeline.